Demand based pricing, Marketing Management

Assignment Help:

Demand Based Pricing: Described methods belong to the category of demand / market based pricing:-

1. What the Traffic can Bear' Pricing

2. Skimming Pricing

3. Penetration Pricing

  • What the Traffic can Bear' Pricing: The seller takes the maximum price that the customers are eager to pay for the product under the given circumstances. This technique is used more by retail traders and than by manufacturing firms. This method brings big profits in the short term objective. But in the long run it is not a safe concept; chances of errors in judgment are very high.
  • Skimming Pricing:This method aims at high profits & high price in the early stage of marketing the product. It gainfully taps the opportunity for selling at high prices to those segments of the market, which do not bother much regarding the price. This particular method is very useful in the pricing of new products, especially those that have a luxury or specialty elements.
  • Penetration Pricing: Penetration pricing seeks to gain greater market penetration throughout relatively low price. This method is also helpful in pricing of new products under definite circumstances. For instance :when the new product is capable of bringing in large volume of sales, but it is not a luxury item and there is no affluent / price insensitive segment, the firm can select the penetration pricing and make large size sales at a reasonable price before competitors enter the market having a similar product. Penetration pricing in such type of cases will help the firm have a good coverage of the market and keep competition out for some time.

The price elasticity of demand is taken into account in all of the demand based pricing methods, indirectly or directly. Price elasticity of demand refers to the relative sensitivity of demand for a product to changes in its value in other words how significantly the sales of the product are affected when price is changed. If decrease or increase in the price of the product results in significant increase or decrease the product is said to be price elastic conversely, if price change does not considerably affect the sales volume, a product is called to be price inelastic.


Related Discussions:- Demand based pricing

Setting the advertising objectives, Setting the advertising objectives: ...

Setting the advertising objectives: The advertising objectives must flow from prior decisions on the target market, market positioning, and the marketing mix. Advertising obj

Maturity stage - product life cycle, Maturity Stage In the product lif...

Maturity Stage In the product life cycle the maturity stage is that stage where sales growth slows or levels off. Product managers can have to do more than easily defend their

International Marketing, David Ricardo''s theory of comparative advantage i...

David Ricardo''s theory of comparative advantage is an improvement over Adam Smith''s theory of absolute advantage.

Describe the one-way communication, Describe the one-way communication ...

Describe the one-way communication By recognising different transactional and relationship needs of the target audience, marketing communications can be used to engage with a v

Mobile Wallet Payment value chain, How does the mobile wallet payment value...

How does the mobile wallet payment value chain look like? And where in the payment value chain can we place the mobile wallet service?

Sales management, explain creative selling and its advantages

explain creative selling and its advantages

New product development, New Product Development Organizations have to...

New Product Development Organizations have to develop new services and products. A company must be good at making new products. It also ought to manage them in the face of mod

Solely to increase the profits, does the marketing exits solely to increase...

does the marketing exits solely to increase the profits

What is total customer satisfaction, Question 1: (a) What is total cus...

Question 1: (a) What is total customer satisfaction. (b) How will customer safisfaction be measured. (c) Describe the importance of customer value creation and discuss ways

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd